It’s important to adhere to a schedule to send out your Accounts Receivable invoicing quickly and send out reminders and overdue notices to customers quickly. To ensure more prompt payment, it’s important to consider offering discounts to customers for prompt payment – and it’s a way to increase cash flows as well. One strategy to speed recovery is to set up a process to call customers, and not just wait until 30 days, but ensure the receipt of the invoice. Also to ensure that they got the invoice in their system, and it’s going to be processed for payment at the due date on the invoice.
If there are issues, you’ll find those out before you do the invoice, and you could involve your sales team to help rectify any service or quality problems. This will head off any issues well before the due date of the invoice, and that enhances your ability to deliver a quality product or service to your customer.
In the event that the invoice extends beyond your actual due date, that’s when you get your sales team involved, since they’re the one who has the relationship with your customer. They’re the ones who should take the lead in ensuring the reasons why the payment isn’t occurring, and they can help lead the effort before the Accounting and Financing Team actively gets involved in trying to determine the reason for the late payments. If that doesn’t work, that’s when the Senior Executive Teams get involved to ensure or determine the reasons why the payment is not being made.
Keep in mind the collection processes, once it is past due, is always a chance to learn why the processes aren’t working for your customers, or that something has gone amiss. The processes of invoicing is a chance to fix the situation and still retain a good relationship with your customer. If there’s been an issue with the product and service, of course issue a credit right away to rectify the situation and keep a good relationship going with that customer.
However, if it ends up they simply won’t pay, it’s always best to turn to a Collection Agency sooner than later to enhance the ability to get the most out of that receivable. If you do have to turn to a Collection Agency, it’s best to turn to a reputable agency.
So how do you determine what is a good Collection Agency? Well, ask for referral from an Attorney, CPA or Accountant. You could always look for one in a directory of online of Collection Agencies, but it’s important to make sure they’re licensed in the state you do business in, and that they are bonded as well. Don’t worry about their size. Sometimes the smaller one can be just effective as a national or regional one.
Also, it’s important not to wait till the debt is 90 days old. If it’s 60 days old and the customer simply won’t pay, refuses to co-operate, doesn’t communicate, doesn’t return phone calls – then it’s best to go ahead and turn them over right away because waiting has a cost, and the cost is simply you may never get paid. In that case, it’s best to turn over to a collection professional immediately to mitigate the potential loss on your books, and ensure recovery. And recovery means conversion to some cash value!